The U.S. government is one of the largest holders of bitcoin (BTC). Through a series of seizures related to criminal activities, the government has accumulated a substantial amount of the flagship cryptocurrency worth billions of dollars.
According to data from Glassnode, the U.S. is sitting on a stash of around 210,000 coins, valued at around $5.5 billion. The figure is quite remarkable, considering that the total supply of bitcoin is capped at 21 million coins.
Between assets seized from the Bitfinex hack and Silk Road, the US govt currently holds 205,500 BTC worth $6 billion
This makes them one of the largest Bitcoin holders in the world at the moment pic.twitter.com/bm78dKYcg2
— Will Clemente (@WClementeIII) April 27, 2023
More specifically, the government’s holdings account for roughly 1% of all BTC presently in circulation. This poses serious concerns about the price of the leading cryptocurrency, particularly if the U.S. government decides to unload its holdings simultaneously.
How Did the U.S. Government Accumulate $5B Worth of BTC?
The U.S. government has primarily accumulated bitcoin through seizures related to criminal investigations. Bitcoin’s decentralized nature made it an attractive choice for criminals, particularly in its early years, involved in activities such as money laundering, drug trafficking, and ransomware attacks.
In a bid to combat these criminals, the U.S. government has been tracking down their illicit activities. This has enabled the country to dismantle criminal groups and allowed it to acquire large amounts of BTC without having to purchase it on the open market.
Over the years, the U.S. government has seized a significant amount of bitcoin from various criminal cases. However, three major seizures comprise most of the government’s bitcoin holdings.
The first major seizure happened in 2020. At the time, the U.S. Attorney’s Office in the Northern District of California seized 69,370 bitcoins from an individual known as “Individual X,” who had stolen the assets from the infamous Silk Road darknet marketplace.
Likewise, in February 2022, the Department of Justice confiscated 94,636 stolen bitcoins from the Bitfinex cryptocurrency exchange. Ilya Lichtenstein and Heather Morgan, who were responsible for the hack, were also arrested and charged with conspiracy to commit money laundering.
"How Law Enforcement Seized 94,000 Bitcoin Stolen From Bitfinex"
Federal authorities tracked down and seized more than 94,000 bitcoin allegedly stolen from Bitfinex. But how did they get their hands… (Idelto – https://t.co/lvVDicOloC) pic.twitter.com/IoNgHV8aFf
— Idelto (@IdeltoInfo) March 9, 2022
Another major seizure occurred in November 2022 when the U.S. Attorney’s Office in the Southern District of New York announced a $3.3 billion cryptocurrency seizure from fraudster James Zhong, who had unlawfully obtained over 50,000 bitcoin from the Silk Road dark web marketplace.
Does the U.S. Plans to Sell its BTC Holdings?
The U.S. government typically liquidates its seized BTC. The liquidation is handled by the U.S. Marshals Service through public auctions, which allows the government to securely and efficiently unload its bitcoin holdings without doing much harm to the markets.
For perspective, the U.S. has offloaded $366 million worth of BTC in 11 auctions from 2014 to 2023, according to data from software engineer and researcher Jameson Lopp. In the most recent case, the U.S. sold off more than 9,800 BTC connected to the Silk Road in late March.
Despite having a history of selling seized bitcoins, the U.S. government has not offloaded much since April. Some have speculated that the government might be waiting to sell its BTC at higher prices in the hope of more financial gains.
Nevertheless, it is important to note that the government’s decision to sell its BTC would undoubtedly impact the cryptocurrency market. In a recent Reddit post, one user claimed there is the possibility for the U.S. to sell more than 40,000 of its BTC stash at once. They said:
“Initially the thought was that the US government would be smart enough to split this over the whole year and there would literally be zero effect on the market prices, but now it seems like they have not taken the SEC classes about market manipulation.”
“So if they go this extreme route [of selling a high quantity at once], there will be quite a considerable effect on the prices,” the user added. “Let’s hope the U.S. government actually knows their own laws and maybe even postpone those sales to next year.”
As the United States government continues to amass bitcoin through seizures related to criminal activities, questions arise regarding its long-term plans for these holdings. Whether the government will hold onto its bitcoin or opt to liquidate it at opportune moments remains uncertain.
However, these decisions will undoubtedly have significant implications for the cryptocurrency market as a whole. Mainly, they pose serious concerns about the price of the leading cryptocurrency, which will crash if the U.S. government decides to unload its holdings simultaneously.